On November 10 this year, Ukraine’s Anti-Monopoly Committee gave
the go ahead to setting up the Armored Vehicles of Ukraine concern, founded by 34
defense factories largely controlled by the national government. Concern’s priority will
be the design, manufacture and export of armored vehicles and sophisticated science-based
defense products. Concern’s parent company will be the Kharkiv-based Malyshev
tank-manufacturing plant, whose general director and Deputy Industrial Policy Minister
Hryhory Maliuk was elected new concern’s president. The founding members are planning to
draw a number of Russian defense companies in the concern as well.

In Soviet days, Kharkiv’s tank-building school was an element of
an effective machine for the manufacture of the outgoing century’s most popular
ground-based weapon – the tank, and Malyshev factory was the biggest tank-maker in the
former Soviet Union. Kharkiv’s tank school’s greatest achievement was the better-known
T-34 tank, that epitomized Soviet tank-making industry’s advantages over the Western
one. But, in the wake of the Soviet collapse, however, the tank-builders failed to take
the same way aerospace equipment developers did (who successfully preserved cooperative
relations with their counterparts in former Soviet fellow nations, and even started
expanding them), and, naturally, became competitors with one another.

Few in Moscow could foresee Ukraine’s impressive breakthrough to
the already redistributed arms market. That is why Ukraine’s contract with Pakistan for
320 T-80UD tanks came as a complete surprise and a real shock to Russia. Although a
$650-mn contract for 320 tanks is out of proportion to the $3.5 billion one for 436 Leclerks
France signed with United Arab Emirates in the wake of IDEX’93 arms show, it still
stands out against Russia’s tank exports in post-Soviet days, made of 41 T-80U tanks
exported to Cyprus, and 33 tanks of the same model sold to South Korea. But competition
between Kharkiv’s tank factory and Russia’s tank-makers UralVagonZavod based in
Nizhny Tagil and Omsk-based TransMash was no longer bearable. Even tank-makers
themselves, leave alone experts, said time has come to change such a situation.

INFORMATIONAL WAR

In case of the Ukrainian-Pakistani contract, Russia could not sign
it with the best will in the world. Otherwise, it could lose a bigger partner in
military-technological cooperation – India. In must be noted for that matter that, apart
from T-80 tanks, Pakistan was ready to buy from Russia a consignment of SU-27 fighters on
terms very beneficial for Russia. [1,32] India is not only Russia’s age-old arms
importer, but it imports Russian arms in quantities that are only inferior to China. On
top of that, India’s economy in terms of gross domestic product is almost six-fold as
effective as Pakistan’s. That is why it was no surprise that on March 22, 1997, RosVooruzheniye’s
Deputy Director Oleg Sidorenko said in a statement that “The Russian government agent
[for military equipment import-export] has never taken and will not take part in the
Ukrainian-Pakistani tank contract.” “Not one gun or a fire control system, or a
storage battery could lawfully leave the Russia territory for Ukraine,” he added. The
Ukrainian-Pakistani contract was signed in the summer of 1996, while iron monopoly on arms
exports was imposed in Russia in August of 1997 [2].

The IDEX’97 arms exhibition marks the beginning of informational
war between Ukrainian and Russian tank-builders. [3] Russian defense industry officials
could not do other than they did, taking an attitude favorable to India, who has long been
at loggerheads with Pakistan. Therefore Mr Sidorenko noted in the above-mentioned
statement that “To this end they could take several well-known or unknown back-ways.”
That is to say that enterprising businessmen might cooperate ‘under the counter’,
which was undoubtedly beneficial both for Ukrainian and Russian tank-makers. Subsequent
events, showed, however, that the contract had had such a strong political response, that
Ukrainian-Russian cooperation had become practically impossible. It must be noted for that
matter that Ukraine made an attempt to carry on cooperation with the Russian Federation.
Thus, in particular, in the same year of 1997, there was a meeting of presidents of arms
exporting monopolies -- Andrey Kukin of UkrSpetsExport and Alexandr Kotelkin of RosVooruzheniye.
Following that meeting, Andrey Kotelkin said, “Military-technological cooperation
[between Ukraine and Russia – an UNIAN note] could expand, apart from arms export, to
the sale of licenses for the manufacture of arms and military equipment, joint development
of new technology and joint manufacture of new weapons.” [4]. Speaking in an UNIAN
interview, chief of Ukraine’s arms exporting monopoly said that on March 6, the two arms
exporters signed an agreement on “two matters of principled importance – coordination
of pricing policy and cooperation in informational activities and marketing studies for
the advancement of Ukrainian and Russian defense products to third countries’
markets”. [5] But what Moscow was demanding from Ukraine were strategic concessions
rather than real cooperation, however. Kyiv had found itself in a situation in which any
bargaining was out of place. Because it was precisely at that time that Kyiv had began
displaying furious activity in buying [tank] parts and assemblies from France and
Slovenia, and significantly stepping up an effort to design a tank gun of its own. On the
side, both countries’ tank builders and arms business officials were denying tendency
statements and publications written on contract. As an illustration of that time, one
could remember a statement by Malyshev factory director general, denying RosVooruzheniye’s
allegations as though Ukraine was exporting tanks at dumping prices. The same publication
cites a statement by Ukrainian tank designer Mykhailo Borysiuk, spearheaded against Russia
and accusing it of the same wrong-doing. “Russia was exporting its T-72S and T-80U tanks
at prices of 1-2 million USD and $1 million respectively”, Borysiuk alleged. [6] On May
19 of the same year, Mr Borysiuk had to deny a story published in Russia’s Izvestiya
newspaper and predicting that Ukraine would be unable to face the Pakistani tank contract
out. [7] But despite all loud statements, traders in sensitive products did not stop their
attempts to develop cooperation [with Russia]. In the wake of the IDET’97 arms show in
Czech Brno, at which Ukraine for the first time emerged in a tandem with a NATO member
country (the point at issue is a T-72 tank upgrade project also involving France and the
Czech Republic – author's note), UkrSpetsExport Deputy Director General Mykola
Serhiyenko said, “Ukraine-Russia cooperation on foreign markets, exactly on the Chinese
and Indian ones, is possible”. [8] It stands for reason that such an arrogant statement
by Ukraine (with China and India being Russia’s age-long fief), could raise nothing but
irony at RosVooruzheniye. In the course of the whole 1997, Ukraine was giving
Russia to understand that it was willing to cooperate with that country in tank business.
Ukraine pinned hopes exactly on the Pakistani contract. But Russia had never given any
response. Meanwhile the informational war went on, taking the most absurd shapes evry now
and then. Influential Russian business daily Kommersant, for instance, published in
the summer of 1998 an article headlined “Tank War Between Russia and Ukraine”, which
presented as an established fact Russian tank industry’s definite divorce from that of
Ukraine. [9] Some time later, another Russian magazine, Vek (‘century’)
published a story by Aleksey Arbatov, deputy chairman of State Duma’s defense committee,
accusing Ukraine of “tank market piracy” and "of trading in Russian tanks"
[10]. Not long ago, exactly at the IDEX’99 arms exhibition, a Russian high-ranking
Defense Ministry official said Ukraine had not the authority to upgrade weapons of the
Soviet make [11]. It can be observed from the above that the destructive imperial policy
of RosVooruzheniye’s first president Alexandr Kotelkin, and his successor Yevgeni
Ananyev, as well as of some short-sighted generals, was successfully followed by
sensation-seeking media, despite the fact that in 1997, Russia’s arms exports and,
consequently, hard currency proceeds fell 40% and 25% respectively against the previous
year. According to Alexandr Rybas, professor at Russian Academy of Defense Sciences, one
of the problems directly linked with such a sad result of the year 1997 was “Russian
government’s inability to secure real, rather than declarative priority of military
technological cooperation with member nations of the Commonwealth of Independent
States.” [12] The more so because the structure of Russian arms exports, 25% of which
fell on land-going vehicles, is evidence that tanks and their assembly parts could
constitute a considerable part of that structure, should Russia and Ukraine come out as
one on third countries’ markets. It was precisely Russia’s unwillingness to carry on
military-technological cooperation with Ukraine, rather than the latter’s wish to set up
the missing link in its tank-manufacturing chain, that made Ukraine launch effort to make
a tank gun of its own. In March 1998, Mykhailo Borysiuk said tests had been completed of a
new artillery weapon for the T-80UD tank, that was designed to replace the outdated 125-mm
gun 2A46M-1 made in Russia’s Motovilikha. The tank is assembled of parts and assemblies
95% of which are of the Ukrainian make, Borysiuk emphasized. [13]

As late as this year, however, some pragmatists among Russian
business elite began giving serious thought to expanding [military-technological]
cooperation [with Ukraine]. A large slice of credit for that ought to be rendered to RosVooruzheniye’s
third president Grygory Rapota, who abandoned his predecessors’ approach [to cooperation
with Ukraine]. For the beginning, speaking at a ceremony during the IDEX’99 arms
exhibition, he recognized [Russian-Ukrainian] competition [in defense industry] does more
harm than good, and spoke out in favor of launching cooperation [with Ukraine] in certain
defense areas. On the same day, speaking at a ceremony other than that, Mykhailo Borysiuk
confirmed Ukrainian tank builders’ wish to cooperate with their Russian counterparts.
[14] UkrSpetsExport Director General Valery Malev made no less constructive
statements, commenting on prospects for Russian-Ukrainian cooperation in that area. “In
areas where we are competitors we will be merciless. But there is much room for
cooperation in areas where we could be partners,” he once said. [15] The military as
well seemed to begin viewing cooperation potential quite otherwise. Thus in particular, in
the summer of this year, Chief of Russian Defense Ministry’s Tank Administration
Colonel-General Sergey Mayev said, “Ukraine and Belarus should join efforts to create a
tank of the XXI century.” “Russian-Ukrainian-Belarussian cooperation in tank-building
can and must be expanded dramatically so to strengthen the three nations’ foothold on
the world tank market,” he also said. One would find difficulty to quarrel with that
statement by the Russian general, who believes that “military technology of the XXI
century will be science-intensive, and the three nations (Russia, Ukraine and Belarus –
UNIAN note) ought to consolidate available financial resources and break-through
tank-building technologies.” [16]

This year, arms traders came down from generalities to particulars.
In late July, chiefs of the two arms trading monopolies Valery Malev of Ukraine and
Grygory Rapota of Russia held quite a productive meeting to support the idea to set up
bilateral financial-industrial groups (which, however, requires appropriate amendments to
both nations’ laws on military-technological cooperation). On top of that, the two
reached understanding to look into the possibility of cooperation in upgrading weapons and
military technology, in particular, aircraft and armored vehicles. Malev and Rapota also
came out with propositions that extra powers should be given to the two companies (UkrSpetsExport
and RosVooruzheniye – UNIAN note) in decision-making on certain issues of
cooperation between the two defense industries. [17]

And, finally, the concern Armored Vehicles of Ukraine has
been set up to consolidate financial, scientific, technological and production potentials
of hundreds of defense factories in this country to design and manufacture new weapons.
Despite the fact that the new concern is designed to create the missing link in the chain
of Ukraine’s tank-building cycle, Armored Vehicles of Ukraine is open to both
Ukrainian and foreign companies producing armored vehicles of various applications, Maliuk
said, clearly referring to Russian tank factories. According to Maliuk, it was
“precisely interference of some short-sighted politicians, mostly in Moscow, that lead
up to Russia losing some $150 million from broken cooperative relations in tank-building,
while Ukraine had to spend a no less sum of money to launch the manufacture of tank parts
and assemblies. The restoration of once broken cooperative relations would make it
possible to coordinate efforts by Russian and Ukrainian tank builders to create new tanks,
as well as reduce production costs and thus improve marketability of products.” [18]

But the development of wide-scale cooperation first requires the
signing of a sizeable contract, for example with India. Following failed tests of Russian
tank engines in India’s Rajastan desert in the summer of this year, even the Russian
media spoke out in favor of purchasing tank engines from Ukraine, whose diesel engine
[built by Kharkiv’s Malyshev plant] performs very well in hot temperature conditions.
[19]

Some Russian analysts mistakenly believe that a Russian-Indian tank
contract would be disadvantageous to Ukraine. But that is not the case. Ukraine is
currently in negotiations with Pakistan not only on cooperation in the design and
manufacture of the new tank Al-Halid (for which Ukraine will likely to supply
engines and gearing systems) , but also on the supply of another tank division of some 300
vehicles. It should be noted for that matter that Kyiv does not see any problem in
cooperating with [quarrelling] India and Pakistan both at once. As the then Secretary of
Ukraine's Council for National Security and Defense Volodymyr Horbulin put it a few weeks
ago, “Ukraine has to develop military-technological cooperation with all the nations in
order to secure more contracts for its defense industry”. In case of India and Pakistan,
“there is no problem in developing cooperation with them both at once, because quarrels
between the two countries is a problem of their bilateral relations,” Mr Horbulin said.
[20]

A Russian-Indian contract for 250 T-90S tanks may be signed as early
as in November this year, for analysts to have an opportunity to see whether
Russian-Ukrainian cooperation in tank-building is alive. [21] As is the case in other
areas of that sensitive export. The two arms trading monopolies have recently amicably
settled a 1.5-year long dispute over a contract with Greece for a consignment of
small-sized landing ships Zubr. UkrSpetsExport and RosVooruzheniye reached
understanding that both of them would supply Greece with two Zubrs each. And that
example is not an isolated one, not to mention the AN-70 aircraft project and succesful
cooperation on the space service market.

Citation Sources:

1. Pidtext weekly magazine, #10, March 19-25, 1997

2. nterfax-Russia, March 22, 1997

3. CIASR Bulletin of Arms and Military Technology Exhibitions

4.Vechirni Kyiv daily, April 4, 1997

5. UNIAN, March 11, 1997

6. Ukraina Moloda daily, April 2, 1997

7. UNIAN, May 19, 1997

8. UNIAN, May 14, 1997

9. Kommersant, July 4, 1998

10.Vek weekly, August 14-20, 1998

11.Ukrainian Investment Newspaper, #12 of March 30, 1999

12.Independent Military Review, #6, 1998

13.UNIAN, May 14, 1998

14.UNIAN, May 15, 1999

15.UNIAN, March 16, 1999

16.INFO-TASS, VEGA, July 17, 1999

17.Zerkalo Nedeli weekly newspaper, July 31, 1999

18.UNIAN, October 13, 1999

19.Independent Military Review, October 22, 1999

20.Zerkalo Nedeli weekly newspaper, October 23, 1999

21.Defense News Agency, October 27, 1999

(Center for Army, Conversion and Disarmament Studies, a fragment of
treatise on the subject “Informational Security and Ukrainian Perspective”)